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Brexit: Trade


Introduction

The UK formally exited the European Union on the 31st January and the talks have now moved on to the second stage of the negotiations which covers the future trading relationship.

The UK is currently trying to negotiate a free trade agreement with the European Union that will come into force after the end of the transition period (31st December 2020).


What is a Free Trade Deal?

A free trade deal is an agreement between two or more countries to provide preferential access to each others markets that goes beyond World Trade Organisation (WTO Rules). Trade deals typically involve negotiations over:

  • Reducing (or eliminating) tariffs on goods
  • Quotas (limits on the amount of goods that can be traded)
  • Trade in services
  • Intellectual Property
  • Foreign Investment

It is worth bearing in mind that even with extensive free trade agreements (such as the CETA trade deal between the EU and Canada), businesses are still required to:

  • Pay tariffs on certain goods (CETA has removed most tariffs but not all)
  • Have their goods examined at ports to make sure they meet regulatory requirements
  • Submit customs declarations when importing or exporting goods
  • Use Incoterms to outline the terms of delivery and where responsibility lies
  • Apply for an ATA Carnet to facilitate temporary imports into foreign countries (goods for trade shows etc.)

What are WTO Rules?

If the UK is unable to agree a trade deal with the EU then the UK will revert to trading with the EU on WTO rules. Trading on WTO rules means that countries cannot discriminate between trading partners and must offer the same trading terms to all other WTO member states.

The only exceptions to this are where free trade deals have been agreed and that states are allowed to apply preferential treatment to products arriving from developing countries.

Key characteristics of WTO rules are:

  • Paying tariffs on imports and applying quotas
  • Non-tariff barriers to trade such as product standards and safety regulations
  • Full border checks for goods
  • Limited market access for trade in services
  • Absence of mutual recognition for professional qualifications

The Future Trading Relationship

The UK and the EU began negotiations on the future relationship in March 2020 covering the future trading arrangements between both parties. This document contains further information on the negotiating objectives of both sides and what we know so far.

View Briefing paper here


The UK Global Tariff 

The UK Global Tariff sets out the new post-Brexit tariff regime which is scheduled to come into effect from the 1st January 2021. It will replace the EU’s Common External tariff and will apply to imported goods from countries which trade with the UK on WTO terms.

View briefing paper here